Full text: Referendum on the report of the Special Federal Reserve Committee

“What has been the history of this government franchise tax? Up to January 1, 
1929, the Government of the United States has received as franchise tax from the 
federal reserve banks $142,826,000, but those payments have not been at all regular. 
In 1920 the banks paid the government something over $60,000,000; in 1921 they 
paid the government something over $59,000,000; in 1922 and 1923 they fell off; in 
1924 the banks all told paid the government $113,000; in 1925 they paid the gov- 
ernment $59,000, and last year, although the total net earnings of the federal reserve 
banks were over $32,000,000, the government received a franchise tax of $2,500,000, 
which was paid by the six smaller banks in the system. Except for the year 1926, 
when it paid $45,000, the Federal Reserve Bank of Boston has paid no franchise tax 
to the government since 1923. 
“Last year the net earnings of the Federal Reserve Bank of New York were over 
$11,000,000. The amount left after payment of $2,700,000 in dividends was not 
enough to build up its surplus to the required amount and consequently it did not pay 
anything to the government. The Federal Reserve Bank of Minneapolis, smallest in 
the system, made net earnings of over $600,000 and, because it had a large surplus 
in proportion to its capital, it paid a franchise tax of $390,000 to the government.” 
There are sound business reasons for continuing the membership 
of the Secretary of the Treasury on the Federal Reserve Board and 
for keeping the office of the Comptroller of the Currency independent 
sf the Board. 
The federal reserve banks are commonly described as bankers’ banks—i. e., banks 
which render services for banks. As has been pointed out above, however, they per- 
form services for the federal government. It is accordingly appropriate, and in ac- 
cordance with business practice, that the Treasury should have representation in the 
direction of the federal reserve system. It is to be remembered, too, that there is public 
advantage in having the fiscal operations of the government handled by the reserve 
banks and that, if the Secretary of the Treasury ceased to be a member of the Reserve 
Board, he might refuse to continue this arrangement. There is further reason in the 
circumstance that the notes issued by the reserve banks are obligations of the United 
States government. With six appointed members and only two ex-officio,—the Secre- 
tary of the Treasury and the Comptroller of the Currency,—the Board is certainly 
in a position to base its decisions upon consideration of the general public interest. 
The Federal Reserve Board is a committee and subject to all the defects of com: 
mittee action in matters requiring executive action. The difficulty on the executive side 
does not stop with the Board, either; for whatever advantages are found in the present 
reserve system it should be recognized that responsibility is diffused. 
On the other hand, the task of examination and supervision of the great system 
of national banks calls for executive action, which often has to be quick and decisive, 
if the interests of depositors and the public are to be safeguarded to the fullest possible 
extent. This was emphasized by the Comptroller of the Currency who was in office 
in 1923 and who then appeared before a joint Congressional committee. In the course 
of his testimony he spoke as follows with respect to the office he held: 
“The office of the Comptroller of the Currency is one of the most independent in 
the government service. It is a part of the Treasury organization, but the Comptroller 
reports directly to Congress, and his appointment is made by the President on the 
recommendation of the Secretary of the Treasury, to be confirmed by the Senate, and 
his term is not necessarily or usually concurrent with that of the Secretary of the 
Treasury. This arrangement was made with the obvious purpose of protecting the 
(Continued on page 53) 
Franchise Taxes 
New York Bank 
Minneapolis Bank 
of Treasury 
Comptroller of 
Comptroller of 
Executive Action 
(independence of 

Note to user

Dear user,

In response to current developments in the web technology used by the Goobi viewer, the software no longer supports your browser.

Please use one of the following browsers to display this page correctly.

Thank you.